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Income Tax on Sakshi Malik and PV Sindhu: Rio Olympics, 2016!
After Sakshi Malik, it’s PV Sindhu who has brought laurels for the nation by winning a silver medal in the women's single badminton final. In a nail-biting thriller match, Sindhu lost the final set by 6 points but ultimately won the hearts of billions. She became the first Indian woman to win a silver medal at the Olympics games. When the entire nation was starting to loose hope for an Olympic medal, it’s the Indian daughters this time who have risen as the knight in shining armour by winning Olympic medals.
Sakshi Malik and PV Sindhu have both proved their mettle by their outstanding performance and are now all set to be bombarded with awards and prizes by the government and various other entities. The Haryana Government has already announced Rs 2.5 Crore cash and a government job for Sakshi Malik once she returns. In addition, the Railway Ministry has announced cash awards of Rs 75 Lakhs and Rs 50 Lakhs for silver and bronze medal winners respectively. On the similar lines, Indian Olympic Association (IOA) too has announced 30 Lakh and 20 Lakh cash awards for silver and bronze medal winners respectively.
We have always wondered how much money would actually be coming in their bank accounts seeing the amount of prizes and cash awarded to these winners and we are sure you have thought about it too. Questions like Is there any tax deducted from such incomes or are these people liable for any special kind of tax or are these incomes exempt often cross our minds, doesn't it? So let’s get an insight of what actually happens!
Now, there are a lot of sources for these rewards and incentives but if one has to majorly classify them, then it can be summarized into the following categories:
- The Central Government,
- The respective State Governments,
- Government bodies like Ministry of Railways,
- Private Companies, and,
- Individuals. (You read that right, even you can announce an award if you wish too)
So, once the awards / prizes are announced, what is the actual amount one receives. To answer that question let’s get back to the judicial pronouncement passed in the case of Abhinav Bindra, the first Indian to win an individual Olympic Gold Medal at the Beijing Olympics, 2008. What a sight it was! After winning the first ever Olympic Gold Medal, Bindra too was awarded numerous cash rewards and prizes, amounting to Rs. 4.81 crore in total on which the Income Tax Department demanded tax from him in light of Section 56(2)(v) of the Income Tax Act, 1961 since Bindra didn’t pay any tax on the receipt of the amount.
Consequently, Bindra knocked the doors of the Income Tax Appellate Tribunal (ITAT), Delhi by way of an appeal, wherein it was argued that the amount received by him shall not be made taxable in view of the Circular No. 447 dated 22.01.1986 issued by CBDT. And according to the Circular, only the income received by a professional sportsperson shall be taxable, clearly meaning that a non-professional sportsperson is not liable to pay any tax.
The plea of Bindra was heard, and the Honble ITAT Delhi Bench gave a decision in favour of Abhinav Bindra. (Yes, you got that right, he was not liable to pay any tax). Thus, in Abhinav Bindra v/s Deputy Commissioner of Income-tax, Dehradun  35 taxmann.com 575 (ITAT Delhi), it was held that no amount of tax is required to be paid as the sum received is not in the nature of income and since he is an amateur shooter / non-professional sportsperson, the question of section 56(2)(v) does not arise. You may be amused to know that a similar view was taken in the case of famous cricketer Kapil Dev by ITAT Delhi itself.
Further, the awards / prizes received from any Government or on its behalf are exempt under section 10(17A) and from local authorities or trusts / funds are not taxable as per the proviso to section 56(2)(vii). Also, there is no special tax that covers such rewards. But the issue is still very ambiguous and debatable as there are different views available on it and there's no separate section of Income Tax Act, 1961 that governs it.
Hence, it can be safely assumed that an amateur sportsperson or a non-professional sportsperson actually gets all the sum of the prize as there's no tax payable on it. And in the case of a professional sportsperson, he / she might have to pay some tax depending upon the source of such awards as discussed above. So, if you always had that one sport which you discontinued but are still keen to play, go grab the opportunity and make the most of it.
Editor's Note: In our view, all the awards and prizes won by the sportsperson at such international tournaments should be explicitly exempt as these are awarded to them for their exceptional performance at an international level and contribution in recognition of India worldwide. Further, we have an opinion that our government can allow itself to be a little generous on the taxability of these sums so that the more and more people are attracted towards it and sportspersons continue to bring such accolades for the country.